Global Economics

A Tough New Year for China's Migrant Workers

As China settles in to the Year of the Ox, slumping GDP growth and diminishing exports have led to the layoffs of 20 million migrant workers

Like millions of other Chinese migrant workers, Zhang Pingdi left his village in central Hunan province a decade ago to find work in one of the factories in the Pearl River Delta region. He didn't have much difficulty finding work in Dongguan, a manufacturing hub north of Hong Kong, until the global economic crisis spread to China. Last year, 30-year-old Zhang was laid off from three different factories as export orders for electronics and lights dried up. Instead of heading home for Chinese New Year, Zhang decided to stay in Dongguan to get a head start on his job search this year. "I thought about going home to look for work or to start my own company, but it's not that easy where I'm from," he says.

With the weeklong celebration of the Year of the Ox having ended on Feb. 2 and millions of Chinese returned to factory towns along the coast, workers like Zhang are finding it even harder to make money or go home. The global recession knocked down China's fourth-quarter gross domestic product to a seven-year low of 6.8%, and factories, construction sites, and even tech companies have been laying off workers. China's official unemployment rate, also known as the urban registered unemployment rate, hit a 30-year high of 4.2% by the end of December. The Chinese Academy of Social Sciences (CASS) estimates that if the stats included migrant workers (who by the government's reckoning still officially have jobs on farms back in the countryside), the actual unemployment rate would be higher than 9%.

China's 230 million migrants working in export-oriented factories, construction sites, and cleaning crews have suffered the worst from the layoffs. Chen Xiwen, director of the State Council's Office of Central Rural Work Leading Group, estimated at a Feb. 2 press briefing that 20 million migrant workers may have lost their jobs before the Lunar New Year holiday. However, even as they lose their jobs or get big cuts in pay, many of China's migrants are not returning home to farm. "In the 1990s, if a migrant worker lost his job, he would return to his village and not come back out," says Wang Dewen, a migration researcher with CASS. "This new generation of migrant workers is not much different from teenagers in the city. They want to live in the city, so they're looking for jobs in the cities."

No Going Back?

There are several reasons this current generation of migrant workers prefers to stay in urban areas. Some have gotten used to basic urban services such as hot water and flush toilets after living in the city for years and are reluctant to give them up. Others may have let relatives or neighbors back home farm their land while they went to work in the cities, so even if they were to go back to their village, they would have nothing to do. And others have moved their entire families to the cities and rented out their home, so they would have nowhere to stay.

With factories scaling back, that means millions of Chinese migrants might be stuck with no place to go, creating a potentially explosive situation for the government. Conventional wisdom says the Communist Party has managed to keep a lid on social unrest because migrant workers can always go back to farming if they lose their factory jobs. The current economic downturn is challenging that assumption. "If they cannot find jobs [in the cities], then it will affect social stability," warns Wang Xiaogang, dean of the Sichuan Macroeconomic Research Institute, a provincial government think tank.

Already, as the economy has deteriorated, sporadic protests have broken out throughout southern China. Last September, while Luo Zheng, CEO of fashion designer OmniaLuo, was on a business trip in New York, the owner of one of her clothing suppliers skipped town without paying workers' wages. The workers had finished OmniaLuo's order but refused to hand over the clothes until they got paid. The local government intervened and paid the workers back wages so Shenzhen-based OmniaLuo could recover its clothes. "As long as migrant workers have a job and an income, they won't make trouble," says Luo.

Government Opens Up the Wallet

With jobs and incomes more uncertain than ever, though, the prospect of millions of angry migrant workers is prompting China's top leaders to take action. With $1.95 trillion in foreign exchange reserves, the government is in a much better position than when the Asian financial crisis hit a decade ago to open its wallet to help pay wage arrears and other costs to stave off mass protests. Beijing is spending $584 billion on a stimulus package to speed up construction of infrastructure projects, build public housing projects, and raise subsidies to farmers. Provincial governments have come out with their own policies, which include free job retraining, tax breaks, and subsidies for laid-off migrant workers returning home. Sichuan Macroeconomic Research Institute's Wang says the government policies should help, but they are no silver bullet for Chinese migrant workers' unemployment problems. "To solve the root problem, the economy needs to recover," he says.